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How do I set up a pension?

When setting up a pension, you first need to decide which type of pension is right for you, depending on your personal circumstances, employment status and financial situation. You’ll also need to decide how much control and input you want to have around planning and managing your pension.

Setting up a workplace pension

If you’re employed, earning more than £10,000 a year and aged between 22 and 65, your employer should automatically enroll you into their workplace pension scheme. This is called auto-enrolment. As part of auto-enrolment, both you and your employer have to make minimum contributions to your pension.

So, if you meet the eligibility requirements for your workplace pension and wish to remain in your workplace pension scheme, you don’t need to do anything – it will happen automatically.

If you don’t fall within the eligible age bracket, but still earn more than £6,240 in the 2024/25 tax year and want to be part of the workplace pension scheme, you may be able to join it voluntarily, so it is worth speaking to your employer.

If you don’t want to be part of your employer’s pension scheme, you’ll need to tell your employer that you wish to opt out.

It’s your employer’s legal duty to keep you informed about all aspects of their workplace pension scheme, auto-enrolment and how you can opt-out if you want to.

What’s more, you can be enrolled in a workplace pension scheme and also choose to have a personal pension. There are many reasons why you might want to have a personal pension as well as your workplace pension, including being able to increase your contributions and being able to see how your retirement fund is shaping up.

A personal pension is particularly useful if you want to consolidate all your old workplace or personal pensions in one place, so they can be invested and monitored altogether. This could allow you to reduce the fees you pay and give you a clearer picture of all the money that’s being invested for your retirement, rather than being unsure where it is and what it’s doing.

Setting up a personal pension

Anyone can choose to set up a personal pension. You may want to do this to top up your state pension or your workplace pension, but it may be particularly important to consider setting up a personal pension if you’re self-employed.

A personal pension is a pension that you arrange and plan for yourself – you choose the way you want to invest your money, the type of pension scheme you want to join, and how much you want to contribute.

There are different types of personal pensions to choose from. It’s important to understand the differences between the pension types and what they offer. Find out about the different types of personal pension.

When you’ve decided on the type of personal pension you want to set up, you’ll need to choose your pension provider. Here are a few things to consider when choosing your provider:

  • the costs associated with setting up and running your pension
  • how much you’re able to contribute and when you want to contribute
  • the investment options available and the level of risk you’re happy to take with your money
  • how easy it is for you to transfer your money from one provider to another
  • any exit fees the provider would charge if you decided to move away from them in the future.

When setting up your personal pension, it’s important to think about what might best suit your personal circumstances and retirement goals. You may want to seek advice from one of our regulated financial advisers before making any decisions about your personal pension.

What is the best age to start a pension?

The general rule is that the earlier you start putting money into a pension, the better – how much you get out of your pension depends on how much you contribute and for how long, as well as how the investments perform.

Even if you can only pay a small amount into your pension to begin with, starting early can potentially make a large difference to the size of your pension when you retire. But don’t worry, it’s never too late to start putting money into a pension and benefitting from the tax relief on your contributions.

But remember, pensions are just one part of planning for your retirement. As with all saving and investing decisions, what you do with your money will depend on your personal circumstances.

It’s also important to remember that, as with all investments, the value of your pension can go down as well as up so you may get back less than you put in.

If you’re not sure if a pension is right for you, you could discuss your options with one of our financial advisers.

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A pension may not be right for everyone and tax rules may change in the future. If you are unsure if a pension is right for you, please seek financial advice. Please note that during any transfer, your investments will be out of the market.

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